How to start a successful freight motor carrier business?
So, you're thinking about starting a motor carrier business? There are so much ambiguity and confusion in the freight industry on why and how to go about setting up your business and remaining in compliance. Please use the following as merely a starting point, and read official information on FMCSA's website and the links provided below for more information.
Write a business plan
You need a business plan. Whether you’re starting a single or multiple truck operation, having a business plan is your roadmap to get your business started and continue to grow. A business plan helps you understand your goals, get more organized and communicate your unique value proposition to shippers and freight brokers. It should also outline how and where you intend your loads, responsibilities and costs of running your business. Understanding this will enable you what to expect from your company, maximize your profit and avoid legal and compliance problems.
Buy or lease the right equipment
Many fleets mix both options of buying or leasing equipment as they start or grow their business. Close to 70% of the trucks in the market are owned, and in the long run, this option could be financially rewarding. However, leasing has it’s own benefits too. Besides to the relatively small costs of leasing equipment, they are usually well maintained attracting good drivers, avoid safety violations. The decisions regarding the type of equipment depend on what kind of items you plan on transporting. For example, for perishable items, refrigerated vans are appropriate.
Commercial Driver's License (CDL)
Drivers of commercial motor carriers need to obtain a commercial driver’s license (also known as CDL). States issue their own CDLs, and to learn more on how you can go about acquiring CDL, talk to your states DMV (MVA).
There are so much ambiguity and confusion in the freight industry on why and how to go about setting up your business and remaining in compliance. Please use this guide as merely a starting point.
Form a company
Officially register your business with your state. Your options include:
- Sole Proprietorship: Single owner operating as an extension of oneself
- Limited Liability Company (LLC): This protects you from the financial and legal liabilities of the company
- Corporation: Owned by one or more stakeholders and managed by a board of directors
To prevent yourself from liability, you are encouraged to go the LLC or Corp route. Talk to your accountant about your options, and ask our customer support for discount coupons registering your business with incfile.
As part of setting up your business, a registered agent is required by law to enable the government to communicate with you. Acquire an EIN to open a business account among many other things. This number is the business’s equivalent of social security number.
US DOT Number
The US DOT number, used to identify motor carriers, is assigned by the Federal Motor Carrier Safety Administration (FMCSA). Getting a US DOT Number for your company is required by the FMCSA if you are engaged in interstate transportation, and your vehicle weighs more than 10,000 pounds or is involved in Hazmat transportation. The information necessary to complete the application includes company operation, operation and cargo classification, number, type and operation of vehicles. Information about your driver(s) is required to complete the application. The online form
is a simpler and quicker way to apply.
After receiving your US DOT Number, to haul goods across state lines, acquiring the operating authority is required to haul goods across state lines. If you’re a private carrier, for-hire carrier hauling exempt commodities, or are operating in areas exempt from interstate authority, you don’t need to acquire operating authority. Click here
to submit your application at FMCSA.
The FMCSA activates your operating authority after proper insurance documents for your vehicles are filed. Your insurance agent has the right and responsibility to submit this document. Insurance rates vary by the number of vehicles you own, value and level of coverage needed. Minimum insurance coverage differs by the type of carrier including Motor Carrier, Household, and Hazardous. Insurance types include Cargo, Public Liability, Physical Damage and more) Find what insurance is required of you from FMCSA here
The common blanket processing agents cover all 50 states and are more practical than hiring different from each state. The BOC-3 is the form needed to designate your process agent.
Unified Carrier Registration (UCR)
The UCR is formed to collect fees from freight motor carriers for the use of state roads. Fees vary by the number of vehicles you own. Registration and payments can be done at the UCR’s website here
Heavy Highway Vehicle Use Tax
For you vehicles weighing 55,000 pounds or more, there’s an additional applicable tax known as the Heavy Highway Vehicle Use Tax. The IRS annually collects this tax for road maintenance and repair. To comply, you need to file IRS’s form 2290 found here
International Fuel Tax Administration (IFTA)
All states require motor carriers pay IFTA
. IFTA was created to simplify fuel tax payments, remove the need for separate permits and one payment to your base jurisdiction. The number of vehicles in your fleet, taxable fuel consumed, and your destinations determine your fee.
International Registration Plan (IRP)
The IRP is a fee associated with the amount of distance complete in the US States, DC, and provinces of Canada. This fee can be paid online here
Transportation Management Software (TMS)
Optionally, the use of a smart management software enables you to acquire customers, manage your shipment, and every other aspect of your business. Get your free account at AllyTMS to get started.